Lehman Brothers Holdings Inc., in response to investor interest, intends to offer 3,000,000 shares of Non-Cumulative Perpetual Convertible Preferred Stock.
Lehman Brothers also expects to grant the underwriter for the offering an option to purchase up to 450,000 additional shares of the Preferred Stock to the extent the underwriter sells more than 3,000,000 shares of the Preferred Stock in the offering. The proceeds from this offering will be used to bolster the firms capital and increase financial flexibility.
“Given the challenging environment and our previously stated view that it will likely continue the balance of the year, issuing convertible preferred is appropriate as it optimises our funding and accelerates our plan to reduce leverage, and at the same time minimizes dilution to our shareholders. We also felt this was the right time as there was a window of opportunity in the market, as we have received significant interest from several key institutional investors, who have been strong supporters of the firm over time,” says Erin Callan, managing director and chief financial officer of Lehman Brothers and a member of the firms executive committee.
The Non-Cumulative Perpetual Convertible Preferred Stock, Series P, carries a par value of $1.00 per share and a liquidation preference of $1,000 per share.
Upon conversion, the Preferred Stock will be convertible into shares of Lehman Brothers common stock, plus cash in lieu of fractional shares. The non-cumulative dividend rate, conversion rate and other terms are yet to be determined. An application will be made to list the Preferred Stock on the New York Stock Exchange. The offering of the Preferred Stock is being conducted as a public offering registered under the Securities Act of 1933.
Lehman Brothers Inc. is serving as sole book-running manager of this offering. The offering will be made under Lehman Brothers Holdings existing shelf registration statement filed with the Securities and Exchange Commission.